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Disclaimer

I am neither a lawyer, accountant, nor a certified financial planner. If any ideas seem interesting to you here, please discuss them with your professionally licensed advisor before acting upon them. Otherwise, use them at your own risk.

Wednesday, May 24, 2006

Quick Prosper.com Update

Here's a quick update:

8 Loans funded

$450 Loaned

13.24% average interest rate

$200 in additional loans won and being processed (will shift to funded upon completion)

Active loan value $450.79

$350 in winning bids with 16.46% average interest rate

$1000 current investment

The bidding process:

Bid 33 times

Outbid 16 times (some of the 33 bids above were rebids where I was outbid)

Prejudices:

Re-lenders

I have decided not to loan money to anyone else intending to relend it. Perhaps this is foolish, shortsited or even selfish. My primary rule is that I have a clear understanding as to how the person borrowing the money will use it. If the borrower can't specify a very specific third party involved, I'm not comfortable doing it. Perhaps, if I did finance someone else's bank, I should ask them for an equity share as a risk premium (ala VC capital and lending).

Recent late payments

I'm not comfortable lending to people who are late on their current payments. This may be indicative of financial desperation, they are living beyond their means or simply that their finances are out of control. I don't want that risk. They fall into the charity category for me.

Borrowers who relist frequently - playing the interest rates

A few borrowers after receiving a large number of bids decide their story is sufficiently compelling to allow them to relist at a lower interest rate. I don't mind this if it happens one time, although it annoys me because it ties up my capital. But borrowers that do it several times I tend to blacklist.

Changes in loan allocation model

I've decided to invest in $100 amounts rather than $50. Also, I'll try to pull in a portfolio of $10,000 by adding $500 per month.